The Fix Our Infrastructure Fallacy

There is an obvious problem with the theory that continued infrastructure investments will create economic growth. That is, there is a problem that is obvious to most people yet not obvious to economists and others to which infrastructure investments are an abstraction in a spreadsheet, the political path of least resistance for the supposed greater good of increased fiscal expansion.

This obvious problem can best be explained with a common example.

Let’s say the state and federal government team up back in the 1980’s to build a highway, complete with interchanges and frontage roads. Through more state/federal government assistance, local debt, increased taxes and some private investment, the local government is able to provide sewer and water to this area. The result: an explosion of growth just like I described in my essay, "The Classic Case."

Baxter's Highway 371 strip. (Image from Google Earth)

Three decades later, this small stretch of ubiquitous Americana is now looking worn. The fake rock siding is chipped. The vinyl strip malls look dated. The parking lots are overgrown with weeds. The small details – the window treatments, landscaping and dumpster locations, for example – signal another era. Even the ones that are successful three decades later – and that list is very short – top out at the highest compliment one could give the high school homecoming royalty at their 30-year reunion: they look good for their age.

State and federal infrastructure investments do one of two things for local governments. They either (1) build a new place of prosperity, shifting the action from the old and worn to the shiny and new, or they (2) attempt to fix and maintain what is already there.

State and federal infrastructure investments do one of two things for local governments. They either (1) build a new place of prosperity, shifting the action from the old and worn to the shiny and new, or they (2) attempt to fix and maintain what is already there.

After decades of doing the former, we are now growing fewer and fewer winners, but the losers – all those former winners now long past the Illusion of Wealth phase of this growth approach – are growing exponentially. This is partially why there is increasing demand to do the latter, to actually maintain what we’ve already built.

Here’s the rub: Go out and rebuild that highway. Fix that frontage road. Replace that pipe. Add some modern bling like decorative lighting, landscaping and sidewalks. What do you get? If you actually measure the result, not much. Even if you manage to get some of those strip malls redeveloped, the tax base is not going to soar. If you can keep some of those big box stores from being boarded up great, but they are not going to double in value. The upside potential for the auto-oriented American landscape is really small; most of what will ever be there has already been built.

Let me state this another way: Our decision during the 2016 election and into the 2017 congressional session is not about whether or not to build infrastructure as a way to experience growth in the same way we did in the 1960’s. No, our decision is about what to maintain and to what extent we will walk away from stuff we built in the past. The easy growth is done and has been for some time.

This is obvious to anyone grounded in reality, yet if you make your living with a spreadsheet doing back-testing of regression curves, you can look at past infrastructure investments and make some remarkable predictions about the future. We spent X and it produced Y amount of growth. The data proves it! The math on that is ridiculous in and of itself, but extending those gains into the future is ridiculous squared.

Things continue on until they don’t. And it’s not always obvious until it is. My fellow Americans, we need to rethink our approach to growth, development and infrastructure so that we get more out of our public investments. Otherwise, while we might achieve the arbitrary fiscal goal for next quarter, we’ll continue bankrupting our cities, towns and neighborhoods.

Charles Marohn - known as "Chuck" to friends and colleagues - is a Professional Engineer (PE) licensed in the State of Minnesota and a member of the American Institute of Certified Planners (AICP). He is the Founder and President of Strong Towns. Marohn has a Bachelor's degree in Civil Engineering from the University of Minnesota's Institute of Technology and a Masters in Urban and Regional Planning from the University of Minnesota's Humphrey Institute.